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Stock Market or Real Estate

May 05, 2016 - 05:16


Real estate and stocks are both great investments, they are able to generate a person wealth over a short or long period of time while maintaining the freedom to decide what to invest in. But of course it comes with its advantages and disadvantages, but there are some concrete reasons for favoring real estate over stocks as a primary investment channel.


Long Term Stability

Real estate markets can be volatile in the short run, but from a general perspective, real estate is definitely considered a stable investment with advantages over stocks. Since real estate investments often keep pace with inflation (3.2% a year), the value of real estate investments typically rise over the long term. It gets even better when the appreciation for the property increases in value more than the inflation rate, because then you can sell your property for much more. But stocks can mostly be subject to issues that are beyond investors’ control. Wild swings in stock prices because of high frequency trading, news, CEO changes, service/product malfunction and liquidity are a few reasons investors can lose a great deal of money in a matter of seconds depending on the business. Real estate has its ups and downs, just like everything else but almost every local market trend up over time. Historically, the 2008 crash was an anomaly because it was caused by real estate itself so an event like that is rare.

Asset Type

Real estate is an investment in a physical asset that you can touch and experience in the real world. You can go check out the building in one location or area, touch the foundation, drive around the neighborhood, do a rent analysis and bring in a professional inspector. And unlike owning a stock, you can touch, see, and even live in what you bought as a real estate investor. In contrast, investing in the stock market is like investing in a company; when you buy a share of stock, you buy a very small piece of the company. The very existence of stocks depends on a complex and fragile international economic system that can be very unpredictable.



Influencing Value

When you own a piece of real estate there are many factors that you can do to increase the value of a home or property, but of course depending on the location of the property. The most obvious would be to do major repairs to a home. Remodeling and adding any updates the home needs will always bring value to a home. At the same time, keeping it well maintained and away from any harm will keep its value steady for the most part. There are other external influences that decide the max price for the home but the overall point is that with real estate you can control most of the value of the home. In the stock market once you buy a stock you mainly depend on the company to do its work and increase in value over time, but as for yourself, most of the time you cannot have any specific influence on the value of a stock.


There will always be a great demand for properties, homes, and rentals whether temporary or long-term. The biggest advantage I see for real estate investors is that we have much more control over our outcomes than stock investors because we can control our offer and sales prices, can often times take action to increase property values, and we have control over the level of our profits.